Cooneen Watts & Stone Ltd v The Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Laws LJ,Elias LJ,Russell J |
| Judgment Date | 16 December 2015 |
| Neutral Citation | [2015] EWCA Civ 1261 |
| Date | 16 December 2015 |
| Docket Number | Case No: A3/2014/1089 |
| Court | Court of Appeal (Civil Division) |
[2015] EWCA Civ 1261
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (TAX & CHANCERY CHAMBER)
MR JUSTICE NUGEE
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Laws
Lord Justice Elias
and
Ms Justice Russell
Case No: A3/2014/1089
Mr Kieron Beal QC (instructed by Carson McDowell LLP) for the Appellant
Mr Owain Thomas (instructed by Solicitors Office) for the Respondent
Hearing dates: 24 & 25 November 2015
INTRODUCTION
This is an appeal, with permission granted by Gloster LJ on 9 October 2014, against the decision of Nugee J sitting in the Upper Tribunal (Tax and Chancery Chamber) on 24 January 2014 by which he allowed the appeal of the respondents (HMRC) against a determination of the First tier Tribunal (the FTT) made on 31 October 2012. The FTT had allowed the appellants' appeal against three decisions of HMRC.
As Nugee J stated in paragraph 1 of his decision, the issues in the case concern the correct treatment and classification for customs purposes of certain specialised military clothing imported by the appellants (respondents before the Upper Tribunal) from the People's Republic of China. The clothing was designed for the protection of troops in combat. The appellants claim to be entitled to relief from import duty in respect of it.
THE NATURE OF THE IMPORTED GOODS
I shall need to return to the factual history, but there is a useful summary of the nature of the appellants' imports at paragraphs 12 – 17 of the FTT's determination which it is convenient to set out here. I should say that the acronym "IRR" stands for "infra-red reflectance" and "MEU relief" means relief under Council Regulation (EC) No 150/2003 ("the MEU Regulation"), which as will appear figures large in the argument. "MEU" stands for "military end use". The FTT described the imported goods as follows:
"12… [T]he appellant supplies over 150 different types of military clothing and clothing related products to the MOD. This range of products includes a small number of items of clothing which are made of IRR fabric.
13. Most of the relevant clothing is disruptively patterned for camouflage purposes but importantly it all has specific IRR properties. It is these properties which protect the wearer from detection by weapons fitted with infra red assisted vision sights, commonly referred to as night vision goggles. The effect of wearing IRR protective clothing is to significantly reduce the visibility of the wearer to an enemy using night vision goggles. It does this by suppressing the infra red radiation generated by the human body. IRR fabric employs different intensities in the material to suppress the various colours contained in the garment and mimics the radiation emitted by surrounding vegetation.
14. IRR properties are incorporated into the fabric during a manufacturing process which is highly technical and specialised. We understand that the manufacturing process involves secret technology. The IRR clothing in the present appeals is manufactured in China and imported by the appellant into the UK. Unlike ordinary military camouflage clothing, IRR clothing cannot be purchased by members of the public.
15. There are 8 items of IRR clothing which are relevant to the present appeals. Each item also comes in a non-IRR version and no customs duty relief is sought in relation to those items. We were shown the following examples of IRR clothing:
(1) A combat jacket and combat trousers which come in both woodland camouflage and desert camouflage. The jacket and trousers must be worn together otherwise the benefit of IRR properties in one will be defeated by the absence of IRR properties in the other.
(2) A coverall, which is an all-in-one item of clothing
(3) A smock, which is similar to an anorak.
(4) A shirt, which is designed to be worn under body armour.
(5) A cap, which is designed to be worn over a helmet.
16. There is no difference to the naked eye between IRR camouflage clothing and ordinary camouflage clothing. HMRC accept that imports of the coveralls are entitled to MEU relief but deny entitlement to relief in relation to all the other items of clothing.
17. The IRR clothing imported by the appellant is crucially important to combat troops deployed by the MoD. It helps to protect them in the battlefield and helps to save soldiers' lives."
The appellants are what is known as the "Industrial Prime Vendor" to the Ministry of Defence, a contract they have held since 2004 and which was most recently renewed in 2010.
LEGAL MATERIALS
A great deal of EU legislation has been referred to in the skeleton arguments and counsel's submissions in court. I will only set out here some of the headline provisions; I will have to refer to other materials in addressing the parties' rival contentions.
The MEU Regulation, as Article 1 makes clear, suspends import duties on certain weapons and military equipment imported from third countries by the military authorities of an EU Member State. Recital (5) is in these terms:
"In order to take account of the protection of the military confidentiality of the Member States it is necessary to lay down specific administrative procedures for the granting of the benefit of the suspension of duties. A declaration by the competent authority of the Member State for whose forces the weapons or military equipment are destined, which could also be used as customs declaration as required by the Customs Code, would constitute an appropriate guarantee that these conditions are fulfilled. The declaration should be given in the form of a certificate. It is appropriate to specify the form, which such certificates must take and to allow also the use of means of data processing techniques for the declaration."
Article 1:
"This Regulation lays down the conditions for the autonomous suspension of import duties on certain weapons and military equipment imported by or on behalf of the authorities in charge of the military defence of the Member States from third countries."
Article 2(1):
"The duties of the Common Customs Tariff applicable to imports of the goods listed in Annex 1 shall be totally suspended when they are used by, or on behalf of the military forces of a Member State, individually or in cooperation with other States, for defending the territorial integrity of the Member State or in participating in international peace keeping or support operations or for other military purposes like the protection of nationals of the European Union from social or military unrest."
Article 3(1):
"The request for entry for free circulation of goods for which the benefit of a duty suspension under the provisions of Article 2 is claimed shall be accompanied by a certificate issued by the competent authority of the Member State for whose military forces the goods are destined. The certificate as set out in Annex III shall be submitted to the customs authorities of the importing Member State together with the goods to which it refers. It may replace the customs declaration required by Articles 59 to 76 of Regulation (EEC) No 2913/92."
Council Regulation (EEC) No 2913/92 establishes the Community Customs Code. The list of goods in Annex I to the MEU Regulation is in fact a list of numbers. The numbers are what are called CN headings. "CN" stands for "Combined Nomenclature". By use of these numerical references the CN provides for the classification, for customs purposes, of goods entering the EU. The CN is set out in Annex I to Council Regulation (EEC) No 2658/87 (the Tariff Regulation). The Annex is amended each year with effect from 1 January.
Annex III to the MEU Regulation prescribes a standard form for the competent authority's certificate given under Article 3(1). The form includes at Box 6 provision for the insertion of the CN code (in four digits) attributed or said to be attributed (I beg no questions as to the definitive author of the attribution – that is the issue upon the first ground of appeal to this court) to the goods being imported.
The list in Annex I includes CN heading 6211 which falls under Chapter 62 of the CN. As with other CN headings, 6211 includes sub-headings. Chapter 62 was stated to apply only to made-up articles of any textile fabric other than wadding, excluding knitted or crocheted articles (save those under heading 6212). The appellants' case is (and was before the tribunals) that the items of clothing for which they claim relief are covered by heading 6211 33 10. So far as relevant this specifies:
"6211 Tracksuits, ski suits and swimwear; other garments:
…
6211 33 Of man-made fibres:
6211 33 10 Industrial and occupational clothing".
General Rules for the Interpretation of the Combined Nomenclature ("GIRs") are contained in Section 1 of the Annex to the Tariff Regulation, and are published every October. In light of part of the argument before us I should set out GIR Rules 1 and 3:
"1 The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the following provisions.
3 When by application of rule 2 (b) or for any other reason, goods are prima facie classifiable under two or more headings, classification shall be effected as follows:
(a) the heading which provides the most specific description shall be preferred to headings providing a more general description....
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